Local 4 is inside the courtroom for the federal corruption trial of former Detroit Mayor Kwame Kilpatrick, Kilpatrick's dad Bernard Kilpatrick and his childhood friend Bobby Ferguson. Each day we bring you information from inside federal court as it happens.
8:58AM The monitors turn on and the only person in the courtroom is Bobby Ferguson's attorney Susan Van Dusen.
I suspect given the bad weather we'll be late getting started this morning.
None of the defendants are in the courtroom. Kwame Kilpatrick was released this morning the lockup facility where he spent the weekend. Kilpatrick violated parole by failing to disclose all his financial transactions last fall. He still owes the city of Detroit more than $850,000 in restitution payments.
9:05AM People are slowly streaming into the courtroom. Bernard Kilpatrick is first of the defendants to arrive and it sounds like Kwame is still in the security line to enter the courthouse building. Guess he can blame Michigan Corrections for not letting him out early enough this morning.
9:10AM Here comes Kwame. He heads straight for Bernard and gives him a big hug. Then he heads for Van Dusen and gives her a big hug too.
9:12AM Judge Nancy Edmunds enters the courtroom. US Attorney Michael Bullotta says he has one more question for IRS agent Carl Selz, the last witness to testify on Friday.
Jury enters and is seated.
Selz takes the stand again.
Bullotta asks if the witness is part of the Association of Certified Fraud Examiners. Witness says that he cannot use the designation until he completes further education.
9:15AM Jim Thomas cross examines.
Thomas says that witness is not a special investigator for the IRS. Witness agrees.
Witness agrees that he made a mistake when he testified that he was a Certified Fraud Examiner. Also agrees that it is his total responsibility for not paying his dues.
Thomas asks if he had to go to classes to be a Certified Fraud Examiner. No says witness- basically you pay dues and get in.
Witness says you join and every year you have to have continuing education to keep certification.
Witness says he looked it up on a website and his certification has been suspended for over a year.
Witness agrees that he works mostly in auditing and that is different from tax reviews.
Thomas asks if audit procedure was used for Kwame. Not to my knowledge says witness.
Thomas says witness was one of 2 auditors looking at this case in preparation for trial. Selz says he was called as a summary witness but never worked with special agent on this investigation.
Witness says he got a call to work on the case a few months before the trial began.
Thomas asks witness if he remembers sitting behind him and Kwame in September and Thomas asking him to move because he was an agent. Witness does.
Witness agrees that he was brought on to the case after the grand jury indicted.
Witness says he is on as a tech adviser. Thomas asks if there were times the government did not take his advice. Witness says that Bullotta listened closely to everything he said and there was never an item that he threw out there that the US Attorney said they wouldn't follow.
Thomas asks him to explain how he was in any way inconsistent. Witness talking about the $90,000 given from Ferguson to Kwame. Witness says he suggested that it not be listed as income and it was taken off the schedule.
Thomas asking when Bullotta didn't go along with him. Selz saying for the most part he did.
Thomas asks if he included money allegedly given to Kwame by Karl Kado.
Looking at the summary of cash transactions for Kwame between 2002 and 2008. Witness says when he looks at the schedule, he sees the cash. Witness says all he knows is that in that period, he sees a lot of cash coming into accounts and many credit card cash payment. Does he know if the money came from Emma Bell or Karl Kado? No says the witness. He just sees lots of cash coming in.
Witness says he doesn't know anything about any cash correlation in terms of where it comes from.
The summary of cash deposits we are looking at was not prepared by current witness but by IRS special agent Ron Sauer.
Witness says he personally did not make any changes to the document.
Thomas discussing Comerica cash withdrawals not included. Thomas asking if he is aware of withdrawals by Carlita not included. Witness says he is not.
Witness agrees if there was a cash accumulation from previous years that would possibly change the numbers.
Witness says he does not have a masters in tax or CPA license or any expertise in 501c4s.
Thomas asks if he agrees that tax and loans are not taxable. Yes says witness.
Thomas saying that cash gifts or loans would affect the cash numbers in the chart. Witness agrees.
9:30AM So if the cash were gifts, it would affect the more than $530,000 in undeclared income the government is claiming Kwame had. Yes agrees the witness.
Thomas says witness indicated that there were things included in the chart that were based on oral representations. Yes says witness.
But you said that there were also things that weren't included based on oral representations. Witness says that may be true or not, all he knows that there is lots of cash going into the accounts at the time that Kilpatrick was mayor and there were alleged kickbacks being accept.
Witness says that as an auditor he has to piece together what several people were coming in an telling him.
Bullotta asks the judge for a sidebar. Counsel approaches the judge's bench.
Thomas asks if witness was involved in analyzing the Civic Fund or another auditor. Witness says as far as he is aware he is the only summary witness called for this trial.
Witness says he was call for tax purposes and not the Civic Fund.
Thomas discussing CPA Gregory Terrell who prepared Kwame's taxes for 2003 through 2007.
Now Thomas talking about witness testifying about Florida A & M. Witness says he doesn't recall testifying about that.
Thomas talking about the $5,000 donation to Florida A & M from the Civic Fund and the gift receipt sent to Kwame.
Thomas made a mistake. Wasn't this witness who testified about that. It was IRS agent Sauer.
Now looking at a February 15th 2008 letter from Florida A & M to Kwame and Carlita thanking them for their donation. thomas asks witness if he sees anything in the letter referencing the Civc Fund. No says witness.
Thomas indicates that it is addressed to 9240 Dwight St, the Manoogian Mansion.
Thomas says this is a mistake, Florida A & M didn't send it to the Civic Fund but to the Kilpatricks.
Thomas says this is a mistake, much like your mistake in neglecting to renew your certification.
9:42AM Bullotta redirects.
Looking at the chart of unreported income for Kwame for $531,401.72.
Bullotta saying that Carlita's accounts had: one for $17,000 and the other for $27,000. Bullotta says if all that money had been taken out and deposited to Kwame's accounts that is only $43,000 total so we'd still be left with $490,000 in cash so that wouldn't affect his numbers too much. Witness agrees.
Bullotta says is it normal behavior to take small withdrawals of about $100 and then deposit it into another account. Witness agrees it is not.
Bullotta asking if witness found any evidence that Kwame had a cash horde. Witness says no because in all audits he has done, people with cash hordes, do it for a reason because they don't trust banks and are more frugal.
Thomas objects. Judge sustains that witness is going way beyond scope.
Witness describes cash hordes as money that could be in a safe.
Witness agrees that he saw activity inconsistent with cash hordes. Points to suits that are purchased on layaway because usually that would mean there is no cash readily available.
9:47AM Thomas says were you in court when a witness testified to taking money out of a shoe for Kwame. Witness says that was only $1,500.
Thomas says there has been no consideration of cash gifting and loans. Correct says witness.
To the extent of any gifting or loans in this case that chart is not accurate. Witness agrees that would affect numbers.
9:48AM Bullotta asks if witness has seen any evidence of cash gifting or loans. Witness says he has not.
Witness steps down.
9:49AM US Attorney Mark Chutkow calls EPA special agent Carol Paskiewicz.
Straight to sidebar.
Chutkow asks about summaries on Bobby Ferguson's contract revenues. witness says she did some independently and also worked with an independent IRS agent to find Ferguson's revenues. Not profits, just checks coming into his own companies.
Chutkow introducing lots of documents into evidence.
Looking at chart of Ferguson Related Contract Revenues.
CM 2012 Downtown Water Main Replacement Project prior to Super Bowl
Prime Contractor DLZ
WS 650 Downtown Water Main
Prime Contractor DLZ/DWSD- DLZ had oversight role but DWSD paid directly
FEI Revenues= $3,408,496
Downtown Water Main
Prime Contractor DLZ/DWSD
FEI Revenues= $3,527,097
Contracts were between 2003 and last check payment was made in 2007.
Now looking at more contract revenues.
Prime contractor: Lakeshore
Johnson/A &F envrironment= $1,700,0000
Got numbers from Lakeshore
Eastside Water Main
Prime contractor: Lakeshore
FEI=$3,309,923 that includes revenues from Lakeshore and A & H
Witness listing all the checks that support these numbers. Defense lawyer Alex Brennan seems to be following checks listed on her computer- we aren't seeing them exhibited.
Kwame has some sort of mini iPad he is working on.
East side sewer repair and replacement
Prime contractor: Lakeshore
Talking about A & H- former Lakeshore executive Tom Hardiman's company.
So we are already looking at about $18 million in contract revenues to Ferguson-related companies.
Now onto more contracts.
CM 2015- sibling contract to 2014
Westside Water Main replacement
Prime subcontractor: Detroit Program Management joint venture: Detroit Contracting Inc and Xcel
10:10AM Judge asks witness if she is feeling alright. "I'm ok," says the EPA who looks like she may be feeling a little under the weather, along with the rest of Detroit. Judge calls for the 20 minute break a little earlier today.
10:33AM Court back in session.
Apparently, we're trying to track down Chutkow to get started again.
We were discussing another series of Ferguson contracts before the break.
Chutkow apologizes for his delay.
CM 2015- sibling contract to 2014
Westside Water Main replacement
Prime subcontractor: Detroit Program Management joint venture: Detroit Contracting Inc and Xcel
Witness says that the numbers varied from the accounting in the ledgers and the actual checks. Witness says she would you use the bank statements for an actual negotiated amount.
Prime: Inland/ Insituform was not prime but did pay FEI monies.
DWS 864 - sibling contract to 865
Prime: Inland (joint venture with Xcel)
Subtotal for 3 contracts: $42,372,730
And more contracts.
Baby Creek/ Patton Park- sewer overflow project with Patton Park piece
Witness goes over underlying exhibits to support her numbers.
Book Cadillac Hotel
Walbridge, Jomar, Marous Brothers (Cleveland-based company) joint venture with Jenkins Construction & Cadillac Funding Association
Heilmann Recreation Center
2 jurors asking questions about underlying exhibits.
Trial contracts total: $83,829,612. These are are Ferguson-related contracts that we have heard about in this case.
City Related Revenue: $124,756,491. This includes records of Ferguson's bank accounts and that includes all Ferguson company-related payments by the city including Detroit Building Authority and Detroit Economic Growth Corporations. Took out Detroit Public Schools because that is a separate entity. So this figure is all the revenue Ferguson generated from Detroit under the Kilpatrick administration
That's $40 million more than contracts discussed in trial. Just looked at payments from 2002 forward. Could have happened after 2008 but would have had to been awarded while Kilpatrick was in office.
623, water main contract awarded to Ferguson awarded in 1999. Witness includes revenues from that occurred while Kilpatrick was in office.
10:54AM Mike Rataj cross examines for bobby Ferguson.
Rataj says that on these contracts Ferguson was a subcontractor. Witness does not agree because Xcel was involved in some joint ventures.
Rataj recalls DWSD's Dan Edwards testimony about 40 to 60 outstanding contracts. Witness recalls that but she thought there were possibly more. Witness has 11 contracts on her chart.
Rataj puts up the first page of the charts. Directs witness's attention to CM 2012. Rataj calls it CS 1347, the pilot project before CM 2012 came to be.
Rataj says that DLZ approached Victor Mercado, then head of the DWSD, directly to propose this project. Witness says there was an existing 1347 under which the pilot project was run.
Witness says that the payment is for pilot and some extraneous work on CM 2012. Rataj says that the chart doesn't have number for total costs and expenses on CM 2012. No says witness.
Now Rataj moves on to 650 which he says is an extension of CM 2012. Witness does not agree it is an extension.
Rataj says the jury can decide who is accurate and who is not.
Chutkow objects. Judge sustains and tells Rataj to stop editorializing.
Looking at $3.4 million the EPA agent found was paid to FEI on contract 650. Rataj is holding a document that says $3.115- he says that witness based he numbers off of this and there seems to be a $300,000 discrepancy.
Rataj asks to approach the bench.
Judge tells the jury that the volume of paper in this case is huge and sometimes things get overlooked and misplaced. It's inevitable and not worth being concerned about. Rataj now looking at full set of documents.
Looks like DLZ paid $3,115,007.10 in invoices on this sheet. Paskiewicz listed $3.4 million in her chart.
On 651, witness listed $3.5 million. On Rataj's document, lists $1.729 million as total paid invoices on 651 not $3.5 million. That is a substantial discrepancy.
Talking about Hayes receiving work on contracts 642 and 649 that were under the same umbrella group as 650 and 651. 653 went to Eagle Construction, 654 went to Posen, 655 went to D'Agostini.
Rataj says that witness doesn't have any numbers relating to other contractors under the umbrella contract. No says witness.
Rataj says that the chart does not include costs and expenses on 650 and 651. You are correct says witness.
Rataj talking about contract 1368 being bid with 1362. Witness does not recall that.
Rataj incredulous witness not recalling 1362 being rolled into 1368.
Rataj says that FEI was subcontractor to both Inland and Insituform on 1368. Witness agrees.
Rataj says that FEI had $3 million in revenues related to Amendment #4. Witness doesn't recall.
Witness doesn't recall how much money was spent on materials for 1368. Needs documents to refresh her memory.
Rataj recalls Edwards and Darryl Latimer testifying that 1362 was rolled into 1368. Witness says 1361 being rolled into 1368.
Both agree that 1361 became Amendment #1 to 1368.
Rataj asks if she knows how much Inland made on 1368. witness says she believes it was around $100 million.
Witness agress that her chart doesn't have the numbers for any other contractors.
Rataj promises to not belabor any longer but says she does not have costs and expenses related to any other the contracts in her chart. Correct says the witness.
Rataj says that $83 million is figure generated by Ferguson-related contracts listed in this trial.
11:15AM The City Related Revenue figure of $124.75 is after 2002. This includes other contracts that FEI had that is not listed on the chart for trial-related contracts. So this includes additional contracts from the period between 2002 and 2008.
Rataj says one of the most important rules of business is to pay bills on time. Witness agrees.
Rataj talks about benefits and wages paid to Ferguson employees. Witness agrees that Ferguson paid employees, paid for equipment.
Rataj says diesel fule is expensive, do you know how much it is. "I don't know how much diesel fuel is," says witness.
Rataj asks if witness knew that FEI was a union company. She says she knows he had union employees.
Rataj asking if she knows how expensive a back tire on a loader is. Witness has no idea.
Rataj says that Ferguson had to hire sub-contractors on various contracts listed and they had to be paid. Witness agrees with that.
Rataj says he chart doesn't include all costs and expenses. "Right, that's why we called it revenues," says witness.
"Your chart is not the full story of FEI's involvement in the contracts. Right or wrong," asks Rataj.
Witness says she will answer that question in 2 parts.
"No, it clearly does not include the cost of doing business. It is strictly revenues," says the witness.
11:23AM Chutkow redirects.
Brings back the outfalls contract, 849. Lakeshore was the prime and there was a payment of $1.7 million to Ferguson-related companies.
Paskiewicz says that the discrepancy with what Rataj was showing was that there was difference between city of Detroit accounting number and the actual checks sent.
Looking at 650 where witness listed $3.4 million. Witness says she derived that value from looking at the checks.
Going to 651 where she listed $3.5 million and Rataj had shown $1.7 million. Witness says it is the same issue. there was difference between city ledgers and the checks that actually went out.
11:27AM Rataj no more cross.
Chutkow says that US Attorney Eric Doeh will be asking agent Paskiewicz about search warrants.
Lawyers go straight to sidebar.
Doeh promises not to keep Paskiewicz up on the stand too long.
Talking about January 15th 2009. Served Ferguson with a search warrant.
Looking at the photo of the front of Ferguson Enterprises Inc. on Wyoming St. in Detroit.
The EPA agent served the warrant and entered the business. Explained to employees why they were there, that they had a search warrant for the premises.
Witness made her way to Ferguson's office.
Looking at his picture of Ferguson's office with the spiral staircase leading up to the "chillin' pad." Witness identified safe in the office in the credenza behind his desk.
At some point, Ferguson came into the office with some agents and opened the safe at the feds request.
Looking at picture of safe after it was opened. Lots of cash, an old Beta looking videotaped. Witness says she didn't count it but there was apparently $7,000 in the safe. Ferguson asked to remove personal papers which they found to be his birth certificate and driver's license.
11:35AM Rataj looks like he is going to ask questions but consults with Evelyn and says he has no cross for the witness.
Sounds like Paskiewicz is done for the day.
Judge says we will take 5 minute break now.
11:45AM US Attorney Jennifer Blackwell calls Gwen Rosenthal. She is an FBI agent in Detroit. Has been there for 10 years. Works on the public corruption squad.
Was part of the execution of a search warrant on January 15th 2009 in the Guardian building on Griswold. Was serving Xcel Construction. Two people were there, an employee and Bobby Ferguson. They found records of contracts Xcel was working on, banking instruments and cash, $261,500.
Looking at an artsy take of the exterior of the Guardian offices from the ground up. Offices are located on the 24th floor.
Now looking at a picture of Ferguson's office at Xcel. Witness calls it an "executive office"- has a conference table. Witness knew it was Ferguson because of family photos, awards and certificates with name, computer screen login was Ferguson.
Witness indicates Ferguson's desk.
Door in the background of the picture is entrance to the office.
Now looking at a picture of interior door to bathroom through Ferguson's office. The only way into the bathroom is through the office.
Picture taken from the inside of the bathroom looking out. there is a small train track with yellow train on the floor of the office.
In the bathroom, there is a panel in the wall attached on a hinge to the wall. Behind the panel, there was a safe.
There were 3 other safes found- 2 lock boxes and 1 safe. also found in Ferguson's office. One lockbox lead to another safe says the witness.
Looking at the front of the first safe found. Says "American Security" on it. It was opened, and there is an envelope on the safe. It says Calvin Hall on it which is crossed out and then says "BW". witness says that is what Bobby is commonly referred as.
Looking at stacks of cash in open safe. Lots and lots of cash. Most of it still in original bank straps in denominations of $2,000.
Looking at certificates of deposit as well as jewelry, a watch, all found in the safe.
Certificates of deposit in large values:
$410,000, $507,000, $200,000 to Xcel and one $100,000 to Ferguson.
There were 2 payroll checks to Ferguson.
There was a photocopy of check from A & H for $50,000 attached to certificate of deposit. Reference to CM 2014 on the check.
There was a business checkbook with ledger located in the office.
A lot of the cash in original bank straps. Bundles of $2,000 and $5,000. Primarily $50 and $100 bills. $261,500 total cash.
Total amount of CDs was approximately $1.2 million.
12:03PM Turning to different search on September 8th 2010 at 25495 St. James, a townhome in Southfield.
Looking at an exterior picture of front entrance of the townhouse. title was in Shakib Deria's name, found records liking Ferguson to townhouse. Found records for travel in april that year, motorcycle records. There are photos of Ferguson and his family in the home.
Found small portable safe behind the dryer in the laundry room.
Looking at picture of laundry room. See picture of the safe behind the dryer.
Opened the safe and found it full to the top with wads of US currency. contents inventories- $275,000 in cash and 5 official checks for $500,820.
Once they emptied safe, laid out contents. Looking at that picture. Close up of 4 of the checks in the safe, all made payable to Ferguson Enterprises for $100,000. There is a 5th cashier's check was made made payable to FEI for $100,820. Cashier's check not in the photo.
Looking at picture of all the US currency counted out as they labeled the stacks. Cash was found in denominations of $50 andf $100. Strapped in $5,000 and $10,000 bundles. Total was $275,000. The stack was just less than half an inch.
Seems like feds found about $2.3 million in hidden safes in Ferguson's offices and home.
12:11PM Rataj crosses.
Rataj says there is nothing illegal about having safes in home and office. Witness agrees.
Rataj says it is not illegal to have cash at home or business. Witness answers it is not as long as they are not proceeds from something illegal.
Rataj says no law prohibiting this. Witness agrees.
Rataj asks about the dates on the searches. There is a year and 9 months between the searches on the offices and the townhouse in Southfield.
Looking at documents from inside safe at Xcel offices.
Now looking at the bundles of cash in bank straps. Rataj says that would indicate that the money came from a bank. At some point, yes says the witness.
Rosenthal agrees she knew that Ferguson had long standing relationship with First Independence bank.
Witness agrees that when she went to speak to banking officials she would have identified herself as FBI.
Witness told bank people she was looking for records.
Rataj asks if she said she was investigating criminal activity related to the instruments. Possibly, yes says the witness.
Witness agrees that at some point First Independence Bank terminated relationship with Ferguson.
Rataj says you investigated Ferguson at the bank and then they told Ferguson to get his money out. Witness says she wasn't present but knows that the relationship was terminated.
Rataj says the same thing happened at Paramount Bank. Rataj says that once feds investigated Ferguson at the bank they asked him to take his money out of the bank.
Witness says she knows that at some point that relationship ended.
Rataj turns to Nstar Bank. Rataj says the same thing happened. Witness says that Ferguson's accounts were closed automatically because there were no funds in his account.
Rataj saying that Ferguson no longer allowed to bank at Nstar because of federal investigation.
Rataj saying that after 2010 he couldn't find a place to bank. Witness disagrees and says he had accounts at Bank of America and Comerica.
Rataj says she testified to this in timeline of events to grand jury.
Rataj says that Ferguson had to put his money somewhere. "I can't speak to where Ferguson would choose to put his money," says witness.
Rataj says witness knew banks had kicked him out and he would have money in safes. Rataj says that wwa on the warrant. Witness agrees.
Rataj says that Ferguson paid taxes on every dime he had. Witness says she is not an IRS agent but thinks Ferguson paid his taxes.
Witness says she is not part of this case and is not familiar with the tax charges.
12:24PM Witness steps down. Blackwell calls IRS agent Rowena Schuch back to the stand.
Witness says she looked at Ferguson's bank records.
Witness says she looked at accounts for A & F environmental, Bobby and Marilyn personal accounts, Johnson consultants, FEI and Xcel accounts.
Witness says she reviewed cash withdrawals from those accounts.
Looking at chart of cash deposit and withdrawals for Ferguson et al.
Chart is for 2002 through 2008.
Grand total for the period on checks written to cash: $2,552,357.21.
Lots of transactions in the $9,000 range. When you see large numbers under $10,000, it looks like there is an attempt to have a transaction report being made by the financial institution.
The $9,000 checks were drawn from A & F account. In this time frame of October 2/November 6th 2005 highlighted, there were about 5 such transactions. In the course of her investigation, witness found about 17 or 18 such transactions in the $9,500 range in the period between 2002 and 2008.
Last column is who checks are made payable to: either cash or Bobby Ferguson. A & F checks made out to Bobby Ferguson.
Defense calls for sidebar.
Judge wants to be clear that there are no charges in the indictment for money laundering or structuring against Ferguson.
Grant total on cash withdrawals, checks to cash, checks written to cash is $2,551,357.21 million